PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up

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At the company’s annual developer conference today, PayPal debuted its much awaited micropayments product. According to a release issued by the company, the new product is an “in-context, frictionless payment solution that lets consumers pay for digital goods and content in as little as two clicks, without ever having to leave a publisher’s game, news, music, video or media site.”

PayPal equates the product as the online equivalent of dropping a quarter into a game machine. Pricing is set at 5 percent plus 5 cents for purchases under $12, which PayPal says is lower than the fees typically charged by payment processors. For example, under standard PayPal pricing, a $1.00 transaction would incur a fee of $0.33. Osama Bedier, VP of platform, mobile and new ventures for PayPal says the product allows developers and merchants to get the revenue right away.With micropayment pricing, it would cost $0.10. While PayPal for digital goods will be available late fall this year, Facebook will soon integrate the new digital goods payment product.

The company also announced a number of other partners including Autosport.com, FT.com, GigaOM, Justin.tv, Ooyala, Plimus, Tagged, Tyler Projects and Ustream.

As we’ve written in the past, this product is huge for the payments industry because it can be used for an easier payments experience across a variety of industries, including gaming, online content and premium video.

While the payments structure is slightly different than PayPal’s traditional take, this could bring in serious dough for PayPal considering the existing reach of the payments plaform. In 2009 alone, PayPal processed more than $2 billion in transactions for digital goods (out of $72 billion in total). In the first half of 2010, the company has processed more than $1.3 billion, and is in track to see $3 billion by the end of the year. In fact, over 50 percent of direct in-app transactions for virtual goods within social gaming environments are going through PayPal.

The Facebook deal is pretty significant because there are a massive amount of micropayments that flow through the social network on a daily basis with Facebook Credits, gaming and more. Facebook COO Sheryl Sandberg made an appearance on stage at the event with eBay CEO John Donohoe, officially announcing the new partnership.

Sandberg says that while PayPal has been one of the main ways to buy Facebook Credits, now developers can be paid by Facebook through PayPal. Facebook will integrate the digital goods payments product in the network soon.

Bedier says that the new payments platform brings value beyond just gaming—he says that video, news, even TV could use the digital goods payments service. For example, Ooyala has started using the platform as a payments mechanism for premium content.

The Financial Times says that it has 189,000 digital subscribers who pay for its online news content. The news publication is using PayPal for micropayments, subscription payments and more.

PayPal also announced embedded payments, which allows developers to insert direct purchases on any site, including Facebook with only a few lines of code. So purchasers can just click the “Pay with PayPal” button and checkout without having to leave the page. The company demoed the product using a Payvment storefront on Facebook.

One of the more interesting demonstrations was FourthWall Media’s demonstration of its TV “Buy Button” using PayPal. The button allows TV users to essentially buy products on TV using their PayPal account.